Superstar Hedge Managers Facing Hemorrhaging Funds

The Wall Street Journal reported last week that David Einhorn’s Greenlight Capital lost $400 million from its investor base in response to a depressing 2 percent loss during the first half of 2017.

The return of $400 million represents 15 percent of all those who are able to withdraw their stakes in Greenlight, according to Einhorn’s rules for the fund. According to the WSJ Greenlight now has about $7 billion in AUM. The strict rules governing Greenlight allows only half of the fund’s investors to withdraw smack in the middle of the year. When the maximum withdrawals are reached, the rest of the investors must wait until the end of the year rolls around before they too can withdraw their money.

If misery loves company, then Einhorn has some other stars to moan about the state of hedge funds in recent months. John Paulson, according to reports from the New York Times earlier this year, is left with about $10 billion in AUM, down from a high of $36 billion back in 2011. Eric Mindich, who manages Eton Park, said his fund was closing down as his AUM shriveled by $2 billion in 2016.

Investors are cashing in their chips as hedge funds showed lackluster performance during the eight-year-long bull market. Hedge funds averaged 3.7 percent returns for the first half of 2017. Greenlight’s worst year in its history was 2015, posting losses in the double digits. Despite telling his investors that he “failed miserably,” he still did not honor requests to lower his relatively high fees. Greenlight gets a performance fee even when the fund does not “perform.”